Lu Hsiang-cheng is being investigated for insider trading
along with four other people and posted NT$1 million ($34,000)
in bail, Taipei Deputy Chief Prosecutor Huang Mou-hsin said May
3. Lu quit for personal reasons, MediaTek Chief Financial
Officer David Ku said by phone. He declined to comment on the
former official’s “personal conduct.”

Shares of the Hsinchu-based chipmakers have surged more
than 30 percent since MediaTek announced the merger agreement
June 22, compared with a 13 percent increase in the Taiwan Stock
Exchange index. The deal would be the fifth-largest
semiconductor acquisition globally in the past decade. The
companies, which together make 70 percent of the chips used in
televisions, face stagnating global demand for TV sets.

Both companies climbed 1.1 percent in Taipei on June 22
before the merger was announced. Huang declined to give a
timeframe for when suspicious trading occurred. Mediatek
advanced 0.1 percent to NT$366.5 on May 3 and MStar gained 0.4
percent to NT$251.5. The Taiwan Stock Exchange index rose 0.1
percent.

Regulatory Delays

Mediatek and MStar gave documents to authorities on May 2,
they said in separate stock exchange statements. The
investigations relate to the actions of individuals and not to
the companies’ operations, they said. MStar turned over
shareholder information and trading records and MediaTek
provided materials to investigators looking into the planned
deal, they said.

MStar shareholders would get 0.794 of a new MediaTek share
plus NT$1 in cash for each stock held, a 20 percent premium to
the closing price on the day of the announcement, the companies
said at the time.

Regulatory delays have raised the price of the deal, Ku
said last month, without quantifying the cost. Mainland China’s
antitrust regulator remains the final hurdle after Taiwan and
South Korea authorities gave their approvals.

Insider trading is punishable by as long as 10 years in
prison under Taiwan law. In separate cases, executives of
Inventec Appliances Corp. and AU Optronics Corp. have been
acquitted of the offense.

MediaTek named Aaron Chang as its new head of China
operations, it said in a May 3 stock exchange filing.